Restructuring: "There must be no hesitation or procrastination"

Companies are well advised to seek help at the first signs of a crisis. After all, only those who initiate reorganization or restructuring at an early stage have any chance of being rescued. But in practice, things look different in many places. An urgent appeal from our interim manager.

It is noticeable in many places: the German economy is in crisis. This is a fact. But what is the situation in individual companies? Many are not self-critical enough and believe that a crisis only has external causes. But the managers responsible are usually wrong. But why are they not honest with themselves? Perhaps it's for the same reasons that we don't go to the doctor in time. Preventive care? Let the others do that. And if we do go for a check-up at some point, it's for one reason only: we're in pain. This is how many managing directors deal with potential crises. They only seek help when things are really serious. But by then it is often too late.

"Crisis management is always."

So when is the right time to act and proactively tackle a crisis? Always! As soon as companies notice the first symptoms of a crisis, such as ongoing discussions with stakeholders, declining sales or the realization that they have bet on the wrong horse strategically, they must act decisively and consistently. The success crisis is already the last phase in which companies can continue to act on their own responsibility. They still have available funds and therefore the opportunity to make smart decisions themselves. Those who do not act immediately and consistently tackle unpleasant issues now will have to rely on others later - with an uncertain outcome and under increasing time pressure.

It does not even have to be the management that notices the signs of a crisis. Even interim professionals, who originally come to a company with a completely different brief, are valuable advisors. Because with their unbiased view and experience, they can uncover many trouble spots - even those that are still hidden.

"Companies have to admit their own failures. That's hard."

The thing is: Management must be able to bear the truth. When in doubt, they have to admit their own mistakes. That is hard. But it is unavoidable. Companies that are knowingly in a crisis must not blame politics, globalization, the more innovative and digitally superior competition, the advancing development of AI or anywhere else. No, they themselves are responsible for their actions in a world that is changing at an increasingly disruptive pace. Crises are often self-inflicted because companies fail to adapt strategically or operationally to the unstoppable digital transformation, or do so too late. This makes it all the more important to self-critically scrutinize previous actions and systematically track down exactly what has gone wrong in all areas. There must be no false consideration. Things need to be uncovered relentlessly - no matter what they are.

This is exactly where a certified restructuring and reorganization consultant can help, either as a strategic advisory and monitoring CRO or as an actively implementing interim manager in the context of restructuring. His analysis provides answers to two crucial questions: Is the going concern prognosis positive? And can the company be as profitable in the future as is usual in the industry? Even if companies answer both questions in the affirmative, restructuring is not a sure-fire success. It always requires a tailor-made concept including consistent implementation, ongoing communication and the professional support of an external consultant. Otherwise, there is a very high risk that the reorganization or restructuring will fail. It is precisely because many companies fail to observe these success criteria that only a third of projects succeed.

Consistent, direct, relentless

When a restructuring manager or consultant comes to a company that is on the verge of going out of business, everything is at stake. The most important thing is not to lose any time and to secure liquidity first. If you want to save your company from insolvency at the last minute, you have no choice but to trust a professional who will analyze and consistently work out exactly what led to the crisis. Relentlessly and honestly, regardless of losses and personal sensitivities. There must be neither hesitation nor procrastination. Interim professionals have to analyze and clean up - as was the case with a well-known shipyard that had got into an existentially threatening predicament due to mismanagement. The first measures consisted of setting up a new company, defining clear responsibilities and defining binding, simple and transparent processes.

"There must be no sponge-over mentality when it comes to restructuring. It is important to get to the root of the problem."

Let the good guys take the helm

To nip mismanagement in the bud, three simple basic rules have been introduced in purchasing. Firstly, if you want to place an order, you need three offers on the basis of which an order is placed. Secondly, the lowest bidder receives the order. Thirdly, no payment of an invoice without an official order - without exception. On the one hand, these rules met with little approval from some of the workforce - and from many a supplier. After all, they had benefited from a largely non-transparent system for years. On the other hand, the majority of employees flourished surprisingly quickly. At last there were clear responsibilities, binding guidelines, transparent rules and consistent implementation. Suddenly everything went much better - because the most capable people were at the helm and were now doing everything they could to save "their company". This is how successful restructuring works. Simple and consistent. That's how - and no other way!

This commentary was first published in our special topic "Ways out of the crisis". It provides you with proven best practices and first-hand expert tips for reorganization, restructuring and turnaround. Download now for free!